Types of Stock Market Analysis

There is no shortage of analysis for anyone interested in investing. A search for the term “stock market analysis” turned up 585 million results on Google and well over 55 million Yahoo.¹

The majority of stock market analysis can be lumped into three broad groups: fundamental, technical, and sentimental. Here’s a close look at each.

Fundamental Analysis

The goal of fundamental analysis is to determine whether a company’s future value is accurately reflected in its current stock price.

Fundamental analysis attempts to estimate the value of a particular stock based on a variety of factors, such as the current finances of the company and the prevailing economic environment. Fundamental analysis also may include speaking with a company’s management team and assessing how the company’s products are received in the marketplace.

When a fundamental review is complete, the analyst may decide the stock is an attractive opportunity because the market has underestimated its future prospects. The analyst also may determine the stock to be a “hold” or a “sell” if the value is fully reflected in the price.

Technical Analysis

Technical analysts evaluate recent trading movements and trends to attempt to determine what’s next for a company’s stock price. Generally, technical analysts pay less attention to the fundamentals underlying the stock price.

Technical analysts rely on stock charts to make their assessment of a company’s stock price. For example, technicians may look for a support level and resistance level when assessing a stock’s next move. A support level is a price level at which the stock might find support and below which it may not fall. In contrast, a resistance level is a price at which the stock might find pressure and above which it may not rise.

Sentimental Analysis

Sentimental analysis attempts to measure the market in terms of the attitudes of investors. Sentimental analysis starts from the assumption that the majority of investors are wrong. In other words, that the stock market has the potential to disappoint when “masses of investors” believe prices are headed in a particular direction.

Sentiment analysts are often referred to as contrarians who look to invest against the majority view of the market. For example, if the majority of professional market watchers expect a stock price to trend higher, sentiment analysts may look for prices to disappoint the majority and trend lower.

Which approach is best? There is no clear answer to that question. But it’s important to remember three things: Past performance does not guarantee future results, actual results will vary, and the best approach is to create a portfolio based on your time horizon, risk tolerance, and goals.

Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.

Searches conducted January 8, 2019

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2019 FMG Suite.

The Bureau of Economic Analysis, the official scorekeeper for US GDP, recently announced that real GDP for the US economy decreased at an annualized pace of 4.8% during the first quarter of 2020. As we all know, the second quarter is...

We are excited to announce our latest way to communicate with you, our podcast, A Wealth of Advice. As a firm that believes in meeting our clients where they are, with advice they crave, we decided last year to launch a podcast. A...

In a recent post (“What Gives?”) I offered one potential explanation as to why the S&P 500 is within shouting distance of its all-time high while the economic environment remains so clearly poor. The argument was that...

Check the background of your financial professional on FINRA's BrokerCheck.

The content is developed from sources believed to be providing accurate information.
The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals
for specific information regarding your individual situation. Some of this material was developed and produced by
FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named
representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and
material provided are for general information, and should not be considered a solicitation for the purchase or
sale of any security.

Important Disclosure: This website if for informational purposes only. It is not a solicitation or offer to sell securities or investment advisory services. The expressed views and opinions presented on this website are for informational purposes only, are based on current market conditions, and are subject to change without notice. Information contained herein has been obtained from sources believed to be reliable and is accurate to the best of our knowledge, though Kathmere cannot and does not guarantee the accuracy, validity, timeliness, or completeness of such information. Material presented should not be considered as legal, tax, or investment advice or a recommendation of any particular security, strategy, or investment product. No part of this Site or the materials herein may be reproduced in any form, or referred to in any publication, without express permission from Kathmere. Kathmere Capital Management (Kathmere) is an investment adviser registered under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply any level of skill or training.

Please note: clicking on external links means you will be leaving the site and you assume total responsibility and risk for your use of the site(s) you are visiting. There are no warranties expressed or implied, as to accuracy, completeness, or results obtained from any information posted on this or any linked website.

The Form ADV contains important information regarding Kathmere Capital. Part I and Part 2A of Form ADV is available on a site maintained by the United States Securities and Exchange Commission. The information set forth in the Form ADV has not been approved or verified by any governmental authority.